Coal delay for miners makes sense
Dr David Day
First published in The Age on 8th March, 2012.
There is a degree of political schizophrenia within the Labor government. On Monday, Treasurer Wayne Swan assailed coal magnate Clive Palmer for using his wealth to influence government policy. On Tuesday, Swan attacked environmental organisation Greenpeace for threatening Palmer's wealth. Greenpeace's crime was to announce plans to organise communities to slow down the frenetic expansion of Australia's coal mines and coal seam gas industry.
But the government's schizophrenia runs far deeper than that.
At the same time as the government introduces a carbon tax to reduce greenhouse gases and create a low-carbon economy, it is vastly increasing greenhouse gases by expanding Australian coal mines and supporting the coal seam gas industry. Squaring this circle should not be beyond the capacity of a government that is not in the pocket of the coal miners and which has the nation's best interests at heart.
Beneath all the hysteria that has been created by the Greenpeace announcement, with one official calling for them to be charged with treason, there is considerable merit in the Greenpeace case. And not just for the beneficial effect such a slowdown would have on global warming and hastening the switch to renewal energy. To most people, that would be the beginning and end of the argument. But there are other good reasons why slowing the expansion of coal mines would benefit Australia and boost the sagging political stocks of the Labor government.
The economic arguments are compelling for switching the miners' green light to amber.
The resource industry around the world has been marked by a boom and bust mentality. In the middle of a boom, it is hard to see the coming bust. But coming it surely is, as high prices drive the expansion of mines around the world and the opening of many new ones. The prospective six-fold expansion in Queensland's coal exports by 2020 is just one dramatic sign of this.
Over the next few years, this frenzied expansion will produce the inevitable over-capacity, which will cause a collapse of prices and the shut-down of uneconomic mines. Such a bust will have dire effects in countries like Australia that have allowed large parts of their economy to be hollowed out to drive the mining juggernaut.
Government revenues will collapse and unemployment will increase, with less scope for shifting workers to other sectors of the economy.
Rather than ruing a slowdown in the expansion of Australian coal mines, the prospect should be welcomed by the government.
Instead of leading to a collapse in coal prices, a slowdown should put a floor under their present high levels. This will be good for the stability of government revenues, good for the security of mining jobs and good for accelerating the world's conversion to a low-carbon economy.
By encouraging the rapid expansion of coal mines and the consequent collapse in prices, the government will only encourage a continuing reliance on coal and delay by years the price-led switch to renewable energy. The creation of super-ports on the Queensland coast, and the vast expansion of shipping along and through the Great Barrier Reef, will also place Australia's greatest tourist asset in jeopardy.
Perhaps most importantly, the pace of the development leaves insufficient time to assess the likely effect on Australia's food bowl and water resources. If the Great Artesian Basin - one of the largest underground water reservoirs in the world, which underlies approximately 22 per cent of the country - is polluted by mining, it is gone forever.
Over the last couple of days, government ministers, union bosses and mining companies have all sung from the same song sheet in response to Greenpeace, claiming that any slowdown in the expansion of coal mines will cost jobs and bring the economy to a standstill. The opposite is true.
Because the mining boom has driven the Australian dollar up so high, every additional job created in mining has destroyed jobs in other industries. When the boom collapses, both the miners and the gutted industries will be left stranded.
The government must take a more long-term and strategic view of the present mining boom. Once the mining tax is bedded down, it should emulate other resource-rich countries by creating a sovereign wealth fund to shift part of this windfall revenue offshore as a counter-balance to the inrush of investment funds. Such a fund will help to bring the dollar down from its present destructive level, defend at-risk industries and provide a permanent revenue stream for the nation.
By slowing the expansion of coal mining and coal seam gas, Australia will be able to take a more measured approach to these developments.
It will allow time for governments and communities to assess whether the cost to Australian jobs and industries, and the multi-pronged cost to the environment, is worth the marginal gains that will accrue to the largely overseas mining companies.A
Labor government that can show it really has national rather than narrow, sectional interests in mind will recover much-needed public support and might even inspire enthusiasm from a jaded electorate.
David Day is a prize-winning historian and biographer and an honorary associate at La Trobe University.